UPM Annual Report 2025

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Trade and other receivables

The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. The Group has recognized two types of provisions for trade receivables – a general provision for lifetime expected credit losses and a provision for specified individual trade receivables, both of which are charged to the income statement. The Group uses a provision matrix for estimating lifetime expected credit losses where trade receivables are segregated by businesses. The provision matrix is based on historical observed default rates, adjusted by forward looking information. It takes into account trade credit insurances, payment profile of customers and the factor that as debts get older they are more likely not to be paid. Additionally, the Group recognizes a provision individually for outstanding trade receivables where specific debtor information is available. In these cases there must be objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Trade receivables are permanently written off when there is no reasonable expectation of recovery. The customer entering into bankruptcy or liquidation proceedings or finalizing such proceedings, or entering into debt-restructuring are considered indicators that the trade receivables are no longer expected to be recovered. Subsequent recoveries of amounts previously written off are credited to the income statement. The carrying amount of trade receivables approximates to their fair value due to the short-term nature of the receivables. Other receivables consist mainly of cash collaterals pledged for commodity contracts and interest rate futures. The fair value equals to the amount of cash pledged as collateral. The cash collaterals cover the counterparties' losses in case UPM is unable to meet its obligations. Trade and other payables Trade payables arise from purchase of inventories, fixed assets and goods and services in the ordinary course of business from UPM’s suppliers. Trade and other payables are classified as current liabilities if they are due to be settled within the normal operating cycle of the business or within 12 months from the balance sheet date. Trade payables are recognized initially at fair value and subsequently at amortized cost using the effective interest method. The carrying amount of trade payables approximates to their fair value due to the short-term nature of the payables. The Group is recognizing refund liability for expected volume and other discounts arising from contracts with customers. Customer rebates include mainly volume discounts and are recognized as equal to an amount which is most likely to be paid to the customer. The carrying amount of expected customer rebates is updated at each reporting date, using the latest forecast data available. Customer claims relating to quality complaints are accounted for as revenue-related refund liability. Expected customer claims are estimated based on historical data and the amount of refund liability is updated at each reporting date. Customer claims and customer rebates are typically expected to realize within the next 12 months. Advances received are recognized as contract liability until the performance obligation is fulfilled.

4.6 Working capital

Operational credit risk

€ million

2025

2024

The Group defines operating working capital as inventories, trade receivables, trade payables and advances received which are presented separately below. The performance obligations related to advances received are typically fulfilled within 12 months of receipt of the advance. UPM is focusing on working capital efficiency and targeting a sustainable and permanent reduction in operating working capital.

Trade receivables Trade receivables

Operational credit risk is defined as the risk where UPM is not able to collect the payments for its receivables. The Group has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Outstanding trade receivables, days of sales outstanding (DSO) and overdue trade receivables are followed on monthly basis. Potential concentrations of credit risk with respect to trade and other receivables are limited due to the large number and the geographic dispersion of customers. Customer credit limits are established and monitored, and ongoing evaluations of their financial condition is performed. The Group has trade credit insurances to protect accounts receivables from significant credit losses. In certain market areas, including Asia and Northern Africa, measures to reduce credit risks include letters of credit, prepayments and bank guarantees. Maximum exposure to credit risk, without taking into account any credit enhancements, is the carrying amount of trade and other receivables. UPM does not have significant concentration of customer credit risk. The ten largest customers accounted for approximately 17% (20%) of the trade receivables as at December 31, 2025 – i.e. approximately €188 million (288 million). In 2025, trade receivables amounting to €3 million (15 million) were subject to permanent write-off and the loss was recognized under other costs and expenses. In accordance with the Group’s accounting policy, trade receivables are permanently written off when there is no reasonable expectation of recovery. Inventories Inventories are stated at the lower of cost and net realizable value. Cost is determined by the method most appropriate to the particular nature of inventory, the first-in, first-out (FIFO) or weighted average cost. The cost of finished goods and work in progress comprises raw materials, direct labor, other direct costs and related production overheads (based on normal operating capacity) but excludes borrowing costs. Net realizable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses. If the net realizable value is lower than cost, a valuation allowance is established for inventory obsolescence. Trade and other receivables Trade receivables arising from selling goods and services in the normal course of business are recognized initially at transaction price and subsequently at amortized cost less loss allowance provision. No significant element of financing is deemed present as the sales are made with a credit term of 14–60 days, which is consistent with market practice. Accounting policies

1,106

1,458

Loss allowance provision Total trade receivables

-25

-26

1,081

1,432

Prepayments and accrued income Personnel expenses

3 0 7

3 0 8

Operating working capital € million

Interest income

2025

2024

Energy and other excise taxes

Inventories

1,886 1,081 -1,240

2,104 1,432 -1,369

Other items

151 161

164 176

Trade receivables Trade payables Advances received

Total prepayments and accrued income Other receivables VAT and other indirect taxes receivable

-12

-6

162

169 110 43 322

Total

1,714

2,161

Cash collaterals Other receivables

35 43

Inventories

Total other receivables

239

Total

1,481

1,929

€ million

2025 1,025

2024 1,149

Raw materials and consumables

Work in progress

0

6

Finished products and goods

828

915

Advance payments

32

35

Total

1,886

2,104

Trade receivables aging

2025

2024

Loss allowance provision

Trade receivables, net of provision Trade receivables

Loss allowance provision

Trade receivables, net of provision

€ million

Trade receivables

Undue

987

-2

985

1,347

-3

1,345

Past due up to 30 days Past due 31–90 days Past due over 90 days

68

-1

66

63

-1

62

10

-2

8

14

-2

12 13

40

-19 -25

21

34

-21 -26

1,106

1,081

1,458

1,432

Total

Trade and other payables

€ million

2025

2024

Accrued expenses and deferred income Personnel expenses

162

186

Interest expenses

30

30

Indirect taxes

15

16

Customer rebates Customer claims

99

114

5

6

Other items

108 419

109 462

Total accrued expenses and deferred income

Advances received

12

6

Trade payables

1,240

1,369

Other current liabilities

167

101

Total

1,839

1,938

UPM Financial Report 2025

296

UPM Financial Report 2025

297

296

297

UPM Annual Report 2025

UPM Annual Report 2025